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UnitedHealth Group, (UNHFree UnitedHealth Group Stock Report) the nation's largest health insurer and a Dow-30 component, has released financials for the fourth quarter of 2019. Revenues came in a bit shy of expectations, but adjusted earnings were comfortably ahead of the consensus. The shares rose more than 2% in early morning trading after some profit taking in the premarket.

Revenues for the December quarter clocked in at $60.9 billion, whereas both we and Wall Street were targeting a top line of $61.4 billion. Nonetheless, shareholders did not seem overly concerned about this matter, as the figure compared favorably to the $58.4 billion recorded in the prior-year period. The core UnitedHealthcare arm brought in $48.2 billion in sales, as health plans for people aged 65 years and older were in high demand. Overall, revenues here were up 4% year over year. Too, revenues from its various Optum branches posted a healthy 8% gain. More specifically, performance at the pharmacy benefits manager (PBM) was particularly strong. This unit continues to be a primary reason why UNH shares deserve a premium versus its peers. In fact, it is largely the success of the PBM branch that sparked the recent bout of consolidation in the medical services arena, highlighted by the Aetna and CVS Health marriage. Separately, UnitedHealth has steadily bolstered the Optum branches over time. Most recently, the $300 million purchase of Diplomat Pharmacy should be a nice tuck-in transaction, as management continues to build on the Optum platform, which deals with everything from drug benefits to healthcare data analytics.

Share net for the final three-month window of 2019 came in at $3.90 on an adjusted basis. That amount exceeded the $3.74 a share we were looking for and the $3.28 registered in the year-earlier period. Large gains in profitability were cited at the PBM business, but as a whole, medical costs rose. In fact, UnitedHealth's medical care ratio, the percentage of premiums paid out for medical services, was 82.5% for the full year. The figure was worse than the 81.6% from last year. Management did not initially go into details about what made this metric rise, and while some might find the absence of color there troubling, we are not yet alarmed.

Looking ahead to 2020, management affirmed its bottom-line outlook of earnings per share in a band between $16.25 and $16.55. Leadership is known to err on the side of caution, especially at the start of a particular year, so we are placing our call at the apex of the provided range, or $16.55 a share, which is a nickel higher than at the time of our December review. The consensus on Wall Street heading into today's quarterly report was $16.45 a share. Another note on 2020, due to it being an election year, we see the potential for a reversal of fortunes from 2019. Last year, fears about drastic healthcare policy changes consumed the market. This year, the possibility of aggressive positive changes to the structure of government-based healthcare could be a tailwind. Of course, a lot will depend on the hotbed topics of the election trail, and ultimately, who wins the election.

So with all that said, is UNH stock worth an investment at recent price points? We say yes and no. Yes, for those investors looking to get in for the short term and ride the momentum this selection is currently enjoying. That said, those with a long-term perspective should look elsewhere. The all-time high quotation here is nearly $300 per share, and after today's upward move in price, the stock is approaching that figure. With that, appreciation potential 3 to 5 years hence is subpar. Too, the dividend yield, though rising and well-supported, is now a noticeable amount below the Value Line median given the elevated divisor.

About The Company: UnitedHealth Group is a diversified healthcare company dedicated to helping people live healthier lives and making the health system work better for everyone. It offers a broad spectrum of products and services through two distinct platforms: UnitedHealthcare (provides healthcare coverage and benefits services) and Optum (provides information and technology-enabled health services).

At the time of this article’s writing, the author did not have positions in any of the companies mentioned.